The Customer Success Guide

What Is, Strategy, Metrics, & More!

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An Introduction to Customer Success

May 17, 2019

There’s no doubt you’ve heard a lot about the importance of customer success (CS). Perhaps you are even executing a customer success strategy as we speak or assembled a team ready to focus on CS activities. If so, it doesn’t come as a surprise that customer success is neither magic nor a short-term undertaking. It is likely to challenge the foundations of your organization and require you to rethink how every department operates and interacts with buyers and customers.

The process can be long and tedious with many challenges to overcome and traps to avoid along the way. That’s why we have brought together extensive knowledge coming from years of experience operating at the forefront of customer success and working closely with many SaaS companies to create this practical guide. We believe it will help you streamline your efforts if you are already an experienced practitioner or start on the right foot if you are considering building a customer success roadmap for the first time.

1. What is Customer Success?

Customer success is a vast subject with implications that are so uniquely profound to each company that it’s risky to provide a narrow answer. In this section we take a closer look at the definition and concepts used by the most renowned experts in the field. We’ll then discuss why customer success is so important at each step of the customer success journey.

Adding to these points, Aaron Ross and Jason Lemkin defied conventional wisdom and suggested that the traditional sales funnel with the buyer journey ending after the initial purchase is no longer adequate to explain the realities of today’s businesses. Instead, they suggested a model with an hourglass-shaped pipeline for customer success that encompasses the buyer and customer journeys — with the growing bottom showing that a significant portion of total revenue lies in adoption, retention, expansion, and advocacy.

It’s interesting to note that Murphy, Ross, and Lemkin do not see customer success as a SaaS-only club. Any company — B2B or B2C, product or service based — can win when they support users to achieve their desired outcome, especially since existing customers can generate a lot of additional revenue through upselling, cross-selling, and referrals.

But the need for customer success in SaaS is even more pronounced since this category of companies operates under subscription-based business models. Unlike software licenses and products paid upfront, SaaS organizations like yours must always stay on their toes as customers are free to cancel and switch to an ever-growing list of competitors anytime. For that reason, it’s crucial to explore some of the common misunderstandings that might hamper your ability to prevent churn and to foster customer growth.

Why is Customer Success Important?

It’s not too bold to say customer success can make or break SaaS companies in a subscription-based world. When followed as a core operating philosophy, it can lead to the best possible outcomes — negative or decreasing customer churn, higher customer lifetime value (CLTV), and maximized growth — creating a smoother customer success journey (CSJ) overall.

The customer success journey borrows a lot from Ross and Lemkin’s hourglass pipeline. However, it takes a different perspective considering explicitly the roles companies should play to get customers transitioning through the buyer and customer success journeys.

The roles of customer success in the customer success journey

Not every customer has the same potential for success with your SaaS application and sales opportunities, as a result, are not equal. It makes sense to focus on the buyers who are going to benefit the most from your application while moving away from bad-fit customers who are likely to churn and generate negative word of mouth.

Customer success can be of great help during the buyer journey and actively support sales to drive revenue by establishing an Ideal Customer Profile (ICP) with characteristics that may include vertical, employee headcount, revenue, region, size of customer base, and technology — making it more likely to close deals. What’s more, this initial step filtering for companies representing a perfect fit for your solution can then facilitate the CS roles in the customer success journey. If you already have a good customer success software in place, product and user data from it should help you as you work to understand those good-fit/bad-fit customers.

Role in Onboarding & Adoption

Customer onboarding is the most strategic step in the customer success process. It’s the first time buyers interact with your company as customers, and they are eager to take advantage of the benefits that have been marketed to them throughout the buyer journey. In fact, you cannot move successfully through the customer success journey without a strong adoption phase so it’s critical to evaluate and improve time-to-value here. A great, valuable experience at this stage will drive their intention to stay subscribed, try out new services, and ultimately tell their friends and colleagues about you. But a bad first impression may lead to churn and affect your business reputation.

That’s why your CS team must minimize time-to-value for new users by onboarding intelligently and prioritizing quick wins. That process starts with understanding where your product fits into the customer’s needs and developing milestones for success. It then becomes easier to find the right balance between high tech (e.g., guided tours, targeted help, feature callouts) and high touch engagement points (e.g., kickoff calls, onboarding sessions, end-user training), and provide support with relevant content resources.

Role in Driving Retention

Even a small difference in churn can have a drastic impact on revenue growth. That’s because retaining customers who have already integrated your product into their business processes and know how much value you offer is far less expensive than acquiring new buyers. Maintaining a low churn rate, however, is challenging when your competitors are doing the best they can to lure your users away with appealing alternative solutions.

That’s why it’s necessary to proactively stay ahead of user needs and gather actionable insights. You must keep an eye on the big picture and monitor how customer health has progressed over time: has that major product update paid off? Are users happy with the new functionality you offer?

Additionally, to really improve customer retention, you need the ability to detect the symptoms of churn early and drill down to the segment, account, or user level with deep product usage analytics to analyze the interactions customers have inside your product.

Customer Success Reality Check:

— Acquiring new customers is up to 25 times more expensive than retaining existing ones.

— Increasing customer retention rates by 5% can drive profits up by 25% to 95%.

Role in Driving Expansion

Customers achieving their business objectives with your product are likely to be hungry for more. They might be interested in upgrading their subscription for additional licenses, seats, or functionality as they grow or purchase complementary features or services. The question is: how do you facilitate that and drive company growth?

Customer success teams are ideally positioned to help users take the next step since they have a deep understanding of each account’s needs and, therefore, know which features or products are going to be the most beneficial. As such, they can act as trusted advisors and make logical recommendations relying on user intelligence to identify the right expansion package when it matters the most.

Customer Success Reality Check:

— Between 70 and 95% of revenues come from renewals and upsells for subscription-based companies.

Role in Driving Advocacy

Customers who have been hugely successful with your product probably can’t wait to tell their friends, particularly if they have consistently enjoyed an outstanding user experience. So keep in mind that every interaction (e.g.: onboarding, support, in-app product interaction) with customers is an opportunity to create an advocate and generate high-quality leads that are less expensive to acquire.

But there are also other ways to leverage your promoters. You can get your most successful customers involved in the product iteration process, asking them to advise about the product decisions that would benefit their business. Another approach is to foster a community where users help each other solving the most common issues.

The Customer Success Life Cycle

Let’s look at two effects that take place as you streamline the customer success process. The first one is that your sales pipeline becomes more stable as you avoid bad-fit customers and have more resources to dedicate to best-fit users with the highest expected Customer Lifetime Value (CLTV). On top of that, it becomes easier to contextualize the customer success journey around your most valuable segments, ensuring better conversion rates at each milestone as bad-fit buyers get filtered out early.

Combining an effective customer success life cycle with an ever-growing best-fit userbase composed of customers who are every time more successful through better onboarding, need-driven product iteration, and logical expansion will create advocates who help generate more revenue and bring in more high-quality referrals.

3 Misconceptions about Customer Success

Customer success is gaining legitimacy across both SaaS and non-SaaS organizations. But too often business leaders are still looking at CS as a silver bullet that requires only a one-off commitment. Short-term efforts may satisfy customer needs initially, but aren’t going to unleash the real power of customer success and set you apart from your competition. Here are the top misconceptions about customer success that we hear most often:

Customer success belongs exclusively to one department

You’re right to think that someone must own customer success, but it’s still a hotly debated topic where customer success is housed and to whom they should report: through sales or marketing, independently to the CEO, up to a Chief Customer or Experience Officer. Most SaaS businesses define customer success roles specifically to manage the relationship with new and current users. But, whichever route you choose, your CS specialists will quickly find themselves overwhelmed putting out fires rather than proactively maximizing success if the rest of your organization doesn’t follow the lead and work toward customer growth as a shared objective. In fact, every department must be involved in the customer success process. For instance, marketing and sales should focus their efforts on attracting and selling to best-fit customers, and product teams need to work in tandem with CS teams to develop features that users really want.

Customer success is the same as customer support or account management

Well, that’s not entirely incorrect. CS teams do have fundamental roles to play in supporting users and upselling and cross-selling products. However, traditional support functions are reactive in nature with their primary focus being to fix issues after they arise but not to prevent them. On the contrary, customer success specialists work proactively to devise a plan for a customer’s success, anticipate problems and, if they occur, make sure they never do again in the future. Additionally, the CS approach to sales consists in logically recommending upgrades and adjacent solutions based on a deep understanding of customer needs — rather selling products without considering user context.

It’s true that gathering information with NPS and other customer satisfaction surveys is helpful to assess what users think of your products. But your customer success team may soon find themselves blindsided if that’s the sole source of customer feedback at their disposal or the only measure of a customer’s success. Surveys are valuable to answer specific questions though often lack the depth you need to identify actionable insights. Not to mention that survey-only tools typically only allow you to measure what different segments decided to say about your product, but don’t monitor how they actually behave and interact with each touchpoint and feature or show trends and correlations over time. Feature engagement and product usage analytics are critical to providing context to your users’ feedback.

2. Developing a Customer Success Strategy

Now that we’ve carefully considered what customer success is and why it matters, you are probably wondering what could be a suitable approach to set and execute your customer success strategy. There isn’t just one way to proceed as SaaS businesses can vary widely according to their business model, customer base, stage of growth, budget, and size. Still, some elements are foundational to a successful strategy no matter the context.

We’ve developed a 6-step customer success strategy that should be applicable and easily adaptable to your business. It begins with a well-tuned and aligned customer success plan building on your company mission, followed by a customer success roadmap indicating how your most valuable segments proceed at each milestone with defined customer success goals and corresponding metrics.

Customer Success Goals

Step 1: Define customer success objectives

You must now decide how to proceed with each segment. As much as it might hurt your retention numbers, bad-fit customers must go or at least become low-maintenance accounts. You can do that by guiding them to another product or subscription plans that only contain high-tech engagement points.

Best-fit customers, on the other hand, must be set on an optimal path toward customer success, taking into consideration how successful they have been in the past using your product. With that in mind, Murphy classifies best-fit users into three categories which he refers to as vectors:

A negative vector means users probably had a lousy onboarding experience or lacked product training. They are going to cancel their subscription soon if you do nothing, and the objective should be to take them out of the churn danger zone within, let’s say, the next three months.

Users on a neutral vector are happy with how things are but do not actively intend to use more of your services. Your objective is to convince them otherwise and set them on a positive vector within the next six months.

Customers on a positive vector are ready for logical upgrades and cross-sells and are happy to recommend you to their friends. Objectives for these users might include maximizing annual recurring revenue and increasing the number of high-quality referrals.

So how are you going to measure customer success? Absolute numbers give you a sense of how customer success metrics — number of users, number of issues, revenue — are increasing or decreasing. But percentages and ratios help you understand relations between different aspects and measure efficiency and effectiveness over time. Both categories are relevant to consider overall and comparative performance as well as to evaluate product versions and customer growth.

It’s also critical to consider metrics that may be shared across multiple teams, like marketing, product, or support. As customer success and product management alignment becomes ever-more important for B2B business, consider these metrics customer success and product teams can share.

Customer Success Plan

Step 3: Link company culture and mission

It’s vital that customer success traces all the way back to your company’s culture and mission and sets the foundation for customer success going forward. So before taking direct actions to build a customer success strategy, you may want to take a step back and assess whether every department is sufficiently customer-centric and think about how to address any gap at this stage to center everyone around customer success.

Step 4: Ensure alignment and accountability

All department heads and their staff must share a common understanding of customer success and how they can contribute to it. The fastest way to make this happen is to demonstrate direction support from the C-suite, with business leaders proactively advocating customer success and giving specific customer success responsibilities to every team that interacts with customers or is involved in measuring performance.

Customer Success Roadmap

Step 5: Develop your blueprint

At this step, you want to find out enough about your ideal customers so you can map out how they move from one stage to the next of the customer success journey and what triggers their decision. Questions you might find worth exploring include:

Where does the role of data enter into customer success’ needs?

What are the characteristics that define your ideal accounts?

What does success look to them?

What are they looking to achieve with your product?

How long should it take for them to see quick wins?

How are their needs likely to evolve in the next 6, 12, or 24 months?

What shows that they have hit a milestone and are ready to take the next step?

How do you know when they are deviating from their ideal customer success path?

Again, what kind of data do you need to answer all these questions?

Step 6: Segment wisely

Answers from the previous stage will help you define your segments and tell the difference between bad-fit and best-fit customers. Bad-fit users typically come from organizational misalignment, poor sales/marketing efforts, or changes in product focus and tend to drain your resources and offer too little ROI. They have little to no success potential and are often harder to satisfy since your product is not adapted for them. At the end of this step, you should have a clear perspective about who your most valuable segments are and start thinking about how you are going to foster their success while offboarding bad-fit customers.

3. Customer Success Metrics

Metrics are the bridge between your customer success strategy and the data users generate as they interact with your products, upgrade or cancel subscriptions, and communicate with your company. These indicators can inform you of many different aspects of your business, but information isn’t actionable unless it is readily available in an easily digestible format. So before digging further, we wanted to show you what a dashboard with integrated data looks like and how it can help you make timely decisions using business metrics, customer support metrics, and product usage metrics:

Business Metrics

This first category keeps you informed about the financial health of your business and where revenue is coming from — recently acquired customers or loyal users, and at which stage in the customer success journey. They also give you a high-level view of product performance and user sentiment measuring customer health, which is important for understanding your company trajectory.

Business Metrics

What is Measured

Best Practices

Customer churn rate

Percent of customers canceling or downgrading their subscription

<5% is a common goal for most SaaS businesses

Revenue churn rate

Percent of revenue lost from customers who have canceled or downgraded their subscription

Should grow faster than the corresponding revenue of your top competitors

New Customer MRR

Monthly revenue gained from new customers

Ideally, this is always growing!

Net MRR churn

Percentage of monthly revenue lost from churned customers

Being in the negative here is ideal

Expansion MRR

Percentage of monthly new revenue from current customers

Enough to offset churn and (ideally) enough to make net MRR churn negative

Trial Conversions

Percentage of customers who go from free trial or freemium to paying

50% conversion rate is a common goal

Customer Support Metrics

Even as your customer success managers do the best they can to anticipate everything that users need and move smoothly throughout the customer success process, they are still going to have questions and come across bugs that require fixing. That’s why you need customer support metrics in place to understand the issues arising and measuring how quickly you can deal with them. These indicators also represent an excellent opportunity to identify the weak points of your product’s functionality and make adequate product decisions — including adding new touchpoints, modifying existing ones, and releasing new versions.

Product Usage Metrics

You cannot just expect users to tell you everything you need to know to streamline the customer success process. You can learn a lot when you start looking at how they behave inside your application and monitor product usage to spot areas for improvement or opportunity. A lack of recent product usage can also speak volumes, indicating users stopped finding your product useful and will likely churn sooner than later.

Product Usage Metrics

What is measured

Target/Rationale

Feature Adoption

Percent of feature adopted

Should increase for all new customers and at least remain constant for current users

Feature usage

How frequently a specific feature is used by each user, segment, and/or account

Should be increasing for all new customers or at least remain constant for current users

Feature Churn

Percent of customers who stopped using a certain feature

Should be decreasing over time using high-tech and high-touch engagement points

Feature adoption by upper quartile

Percent of feature adopted by your most active users (top 25%)

Measuring upper-quartile activity can help to identify customers who benefit most from your product

Login activity by upper quartile

How frequently your most active users (top 25%) log in

Measuring upper-quartile activity can help to identify customers who benefit most from your product

Feature usage by upper quartile

How frequently your most active users (top 25%) use a feature

Measuring upper-quartile activity can help to identify customers who benefit most from your product

Product usage efficiency

How efficient users are with your product

Should increase for all new customers or at least remain constant for current users

Number of licenses/seats used

Number of seats or licenses claimed by an organization using your product

Should increase for new accounts or at least remain constant for existing ones

A closer look at Customer Success NPS

This section on customer success metrics would be incomplete without taking a closer look at Net Promoter Score (NPS) as this is a widespread methodology to measure customer experience in the SaaS world. In a nutshell, users are asked to answer the following question: From 0 to 10, how likely are you to recommend our product to a friend or colleague? The score is then obtained on a scale from 0 to 10 by deducting the percentage of detractors from the percentage of promoters.

Customer Success NPS

What is measured

Target/Rationale

Promoters

Percentage of users scoring of 9 or 10

Should be above 65%

Passives

Percentage of users scoring 7 or 8

Should be decreasing as you turn passives into promoters

Detractors

Percentage of users scoring below 6

Should be below 15%

Studies have shown that companies with a high NPS tend to outperform their competitors by a factor of 2 or more and that promoters have an average CLTV that is up to 8 times higher than detractors. For that reason, customer success teams typically administer NPS surveys to gather customer sentiment and identify which users are more likely to be interested in upselling and cross-selling opportunities and which ones are out of their optimal customer success path.

The best way to deploy an NPS survey is usually in-app since it leads to higher engagement and reaches users at the “zero moment of truth” when they are most likely to respond. You can also tailor surveys to measure specific aspects of their customer experience, for example after using a new feature or completing the onboarding process, followed by a comment section for collecting additional feedback.

4. Customer Success Team

Strategies and metrics aren’t going to do you any good without the right people in place. So you are surely curious to know: what does an adequate customer success team structure look like? How should different functions work with each other and enable customer growth from their respective ends? As every product and business is unique, it’s again hard to give a one-size-fits-all answer to these questions and there is still quite a bit of debate about in which department customer success should be housed and how it reports to the executive level. Here are a few of variations of the customer success org chart we see most commonly:

The Customer Success Org Chart

Reporting into sales under the CEO

Reporting directly to the CEO

Reporting to a Chief Customer Officer

Customer Success Roles and Responsibilities

Chief Customer Officer

Chief Customer Officer is a title we are excited to see starting to emerge. They typically appear at the top of the customer success org chart and are typically in charge of the entire customer relationship management, which can include marketing, editorial, success, and product. They have a singular vision of all customer interactions and enough autonomy to act on the big picture. Their customer success responsibilities often include defining goals and strategic best-fit segments, and engaging key accounts at the C-level.

VP of Customer Success

VP’s of Customer Success own the overall tactical planning and operations based on strategies from CCO. They also align high-level workflows between teams and champion ways to scale operations without compromising on user experience.

Director of Customer Success

Leader of the CSMs, they must have an understanding of accounts as a whole and monitor overall customer health and trends. Additionally, they may serve as an intermediary to manage escalation and prioritize urgent CS issues in front of the VP of Customer Success and Chief Customer Officer.

Implementation Specialists and Onboarding Management

These roles are laser-focused on the onboarding, or implementation, phase of the customer success process, which is a critical piece of reducing churn and driving customer success. These teams accept the handoff from sales to customer success and then pass an account on to a customer success manager once onboarding is complete.

Customer Success Managers

Customer success managers (CSMs) work with accounts on a day-to-day basis, usually carrying out the operational responsibilities identified in the customer success journey — monitoring customer health, facilitating onboarding, building relationships with users — as well as analyzing data in more depth to make specific product recommendations. SaaS businesses with a large userbase typically distinguish between high-touch and high-tech customer success managers. High-touch CSMs work closely with most valuable segments and manage fewer high-worth accounts, whereas high-tech CSMs manage more customers mostly through automated touchpoints.

5. Customer Success Software

You need to choose your tech stack carefully to empower customer success teams and execute your customer success strategy. This section should give you a good overview of the various customer success solutions available on the market, talking about the key features they offer in non-jargonistic terms. We broke down our list into three categories to reflect the functionality range offered by each provider, namely customer success platforms and customer success tools.

Customer Success Platform

Customer success platforms are designed to help you manage the customer success journey more thoroughly with data analytics, user touchpoints (especially in-app), and deep segmentation capabilities. Functionality varies from one customer success platform to the other and may or may not be suitable depending on the needs of your SaaS business.

6. Customer Success Resources

We hope that you have found this guide helpful to get started with customer success or build on your current customer success strategy. We believe that implementing customer success as a core operating philosophy is the basis for sustainable customer growth enabling SaaS businesses, customers, and users alike to achieve the best possible outcomes — superior performance, negative churn, maximized customer lifetime value — throughout the customer success journey.

There is a lot more to learn about customer success and we want to conclude this guide by giving you a comprehensive list of resources you can use to deepen your understanding of the topic and stay tuned on the latest happening in the field. If you have any question and would like to see our Customer Growth Platform™ in action, do not hesitate to contact us and schedule a demo.

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